Yeah, single channel is painful to handle. In my experience it's less that half the performance you get from a completely dual channel setup. If I had to guess on Kilz's setup, my bet is on 2 X 1 GB sticks and 2 X 512 MB sticks = 3072 MB (even though Windows is only listing it as 3070).
Bald makes a very good point Kilz - you may want to physically verify how many sticks you have in your box before you spend too much time on anything else. It's an easy first step (just pop the case cover off & look inside), and if that's it, it's an easy fix, too.
To be honest, I can think of all kinds of reasons your rig might be hamstrung. If you really want to tackle this issue thoroughly it's going to probably take some real time to get to the bottom of it. A disco vs. a frame rate issue means some 'one thing' could be mucking everything up, or you may have two seperate issues combining to test your sanity. I came to this convo late, so I may not have the entire picture here, but if you just put this machine together you may want to consider benchmarking the various subsystems to get a clearer picture of what's going on.
If the ram and the onboard sound thing doesn't solve your problems Kilz, I might make the following 'next step' suggestions:
First - for the frame rate issue, test other games on your machine. Try to emulate the settings you use in AH2 as closely as possible with other games and see how your rig fares -- do their frame rates also drop precipitously, or is it only in AH2 that you see this behavior? Have you checked to be certain that you're running the latest video drivers? Did you hook up the auxilliary power connector on your video card (probably, or you'd know it by now). What about setting AH2's video settings as low as possible? Does the poor frame rate issue disappear, or is it the same?
Second - the disco issue is tough. Do you have another machine in your house that you can run AH2 on (even if only badly)? If you do, you might try connecting it to the end of the Cat5 cable you're using on your new rig and playing for a bit to see if you get the same frequency of discos. If so, it may not be your machine at all. It could be your router, cable/DSL modem, or overall Internet service. You could benchmark data transfers from one machine to another to verify your throughput is where it should be. Or you could start by eyeing your latency in AH2 as you play. You might even drag your machine to a friend's house if you can't test another machine on your Internet connection. If you use the same machine at a friend's place and the discos disappear - that's a pointer to the possibility that your machine is ok, and the discos are again related to your service/modem/router/cabling.
Or you could check for updated drivers for your motherboard and your network interface card (if you're using a motherboard that has multiple built-in NICs, you could try connecting your cat5 cable to the other NIC and seeing how that goes - just be sure that the other port is enabled in both your system BIOS and in Windows).
I'm sorry to see that you're having issues like this Kilz. In my experience these types of issues can be as troublesome and insidious as the dreaded blue screen'o death. Good luck to you!

-Caz1
Er, P.S. - I didn't see where ya ever answered MrRiply on the OS question? When you picked your poison - which poison pill did you decide to take? Windows XP or Vista? Sounds like XP, but yeah.